LONDON—Oil was steady on Monday ahead of a meeting by OPEC and its allies which may determine whether a recent rally in prices amid supply shocks and a recovery from the COVID-19 pandemic will be sustained.
Brent crude was down 6 cents or 0.1 percent at $79.22 per barrel by 0935 GMT. It rose 1.5 percent last week, its fourth weekly gain in a row. U.S. oil dropped by 13 cents or 0.2 percent to $75.75, after gaining for the past six weeks.
Oil prices have risen due to the supply disruptions and a rise in global demand, pushing Brent last week above $80 to a near three-year high.
“Our base case expectations for today’s OPEC meeting is that OPEC continues with its existing agreement to unwind its production cuts by around 400,000 bpd each month,” Morgan Stanley said in a note.
“However if there is a reason to do so faster, it is because OPEC’s own oil consumption is also recovering at a rapid pace.”
OPEC+, which groups the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, is facing pressure from some countries to produce more to help lower prices as demand has recovered faster than expected in certain parts of the world.
OPEC+ agreed in July to boost output by 400,000 barrels per day (bpd) every month until at least April 2022 to phase out 5.8 million bpd of existing cuts.
The oil price rally has also been fuelled by an even bigger increase in gas prices that have spiked 300 percent and are trading around $200 per barrel in comparable terms, prompting switching to fuel oil and other crude products to generate electricity and for other industrial needs.
“The uneven nature of the post-pandemic recovery will keep demand-side uncertainties in play, giving rise to oil price volatility,” Fitch Solutions said in a note.
By Noah Browning